Whither a uniform fiduciary standard

There’s an old sailor’s mantra that says, “Red sky at night, sailor’s delight. Red sky in morning, sailors take warning.” On the landscape of fiduciary standard, is it morning or night?

Late last year, it appeared the investment advisor industry was headed for some smooth sailing. On October 28, 2013, SEC Chairman Mary Jo White stated that developing a fiduciary duty for brokers remains a “major focus of our efforts.” She continued that while she couldn’t predict “when we reach a rule proposal, it’s very important to work on and resolve where we are going on it.”

The day the committee released these recommendations, Chairman White responded, “I think this is a very important issue myself. … This committee’s recommendations are very important to us.” (see full article).

But just as it looked like the industry would finally see a uniform fiduciary standard, the SEC indicated it had higher priorities. Lots of them.

On December 2, 2013, just 10 days after the committee’s recommendations were released, the agency released its regulatory agenda, listing 43 topics it wanted to address before tackling the fiduciary standard — which now was listed on its “long-term actions” list.

In other words, it appeared this “very important issue” had been moved to the back burner.

Not so fast. On February 21 of this year, Chairman White stated, “We will intensify our consideration of the question of the role and duties of investment advisers and broker-dealers, with the goal of enhancing investor protection.” InvestmentNews reporter Mark Schoeff reported this apparent change of heart:

“In a meeting with reporters after her remarks, Ms. White said that she wants the five SEC commissioners to come to a conclusion on whether to implement a uniform fiduciary standard for investment advice and to decide whether to harmonize regulations that govern investment advisers and brokers.”

It now appears that the SEC will decide this year “whether” to proceed with a rulemaking on fiduciary standard.

Schoeff, reporting on the same meeting, quoted Gallagher as saying, “At this point, I’m not sure we need to use [the Dodd-Frank authority]. … I’m not sure, quite frankly, a majority of the commission believes that or believes we should use it in any way.”

Mr. Gallagher told reporters after the meeting that there had not been a discussion among the commissioners about the fiduciary standard since the SEC put out a request for information a year ago to help it draft a cost-benefit analysis.

“The chairman is pushing the staff very hard to get us something that will be a decision point,” Gallagher was quoted as saying. “I start from the position that it’s not necessary until someone proves it out.”

So with all this back-and-forth in recent months, what should we expect going forward? Delight or warning?

As we’ve reported before, the SEC has a very difficult challenge on its hands. Insurance companies have come out strongly against a fiduciary standard. Brokerage firms have come out in favor — just as long as it’s not the ’40 Act and its current business model continues: They can keep charging commissions, underwriting securities offerings, and making markets in securities.

The investment advisory industry has come out mostly in favor of a uniform fiduciary standard, though, more recently, advisors and their advocates have warned that if the SEC were to impose a “watered-down,” disclosure-based standard, the end result could be worse than the status quo for both investors and investment advisors.

As I continue to meet with lawmakers and regulators, I will weigh in on behalf of you and your clients as appropriate. And, as always, we’ll watch closely and continue to listen to your concerns. Please share your thoughts via this post or reach out to me–I’d love to hear what you think about this topic that is so important to our industry.

Whither a uniform fiduciary standard

Call 800-934-6124 and talk to one of our experienced consultants today.

Complete this form

And we'll reach out to start the conversation.

Please correct the information above to submit.

The information you provide is completely confidential.

Thank you for your interest. We treat each inquiry with the highest confidentiality. We're getting your question into the right hands and someone will be in touch with you shortly. We look forward to helping you.

This is not an offer or solicitation in any jurisdiction where we are not authorized to do business or where such offer or solicitation would be contrary to the local laws and regulations of that jurisdiction, including, but not limited to persons residing in Australia, Canada, Hong Kong, Japan, Saudi Arabia, Singapore, UK, and the countries of the European Union.

Third-Party Site Disclosure

You are about to leave the TD Ameritrade Institutional website and enter an unaffiliated third-party website to access its products and services. The third-party site is governed by its posted privacy policy and terms of use, and the third party is solely responsible for the content and offerings on its website.

Click Continue to go to the third-party site, or click "X", to return to the original website.